While many parents in South Africa place a high importance on education many are still confronted with insufficient savings when it comes to funding their children’s tertiary studies.
This is according to Anil Jugmohan, an Investment Analyst at Nedgroup Investments, who says that without a certified tertiary education, the chances of South African children finding long-term employment are low.
He points to a report by the Organisation for Economic Cooperation and Development (OECD), stating that South Africa has the worst unemployment rate among 15 to 24 year olds.
“Only one in four South African matriculants will find employment after school. It is crucial to upskill our young population and educate parents on the importance of setting aside funds to provide their children with the best chance of permanent employment – a university degree. For a number of reasons, SA is slowly moving towards the scenario faced by countries like China, where advanced degrees are becoming the bare minimum to find good employment,” he says.
Jugmohan urges parents to put long-term financial savings plans in place that will enable them to send their children to a reputable tertiary institution.
“Of course, many parents are already struggling to meet the expenses involved in raising a family – especially in an environment where the economy is losing momentum fast and expenses are constantly on the rise. It is always worthwhile to look for opportunities to be thoughtful around spending and financial planning,” he says.
Jugmohan says the government is also taking this challenge seriously by supporting various initiatives designed specifically to incentivise individuals to start saving early for their children’s tertiary education. “By consistently contributing relatively small amounts now, parents will eventually accumulate an attractive lump sum by the time the child is ready for university”.
“While saving for your child’s education may be your primary goal, the real prize is watching them reap the benefits that a college or university degree offers. The crucial thing to understand is that it’s never too early to start,” he says.
Jugmohan provides the following tips to young parents saving for their children’s education:
– Start early: The longer the investment period, the more likely the fund will grow without too much strain on your budget for other expenses.
– Accept that a lower standard of living might be necessary in order to avoid a higher risk of financial difficulty later.
– Try to avoid making withdrawals unless absolutely necessary: The effect of compound interest means that any withdrawals will severely curtail the accumulated amount.
– Encourage your child to contribute to their education with money from part time and holiday jobs. Not only will this help the final amount but it also instils in your child an understanding of the importance of saving and budgeting.
– Research possible scholarships and bursaries. There are funding grants available and you should see if any are applicable to your child.